Buy Now, Pay (A Lot More) Later

The rise of online shopping, smartphone apps, and instant delivery has upended the way people shop for goods from groceries to automobiles. One of the most notable developments in recent years is the range of so-called “buy now, pay later” plans.

While companies like Klarna offer convenience and flexibility when it comes to financing purchases, experts say it comes with a significant tradeoff. In most cases, people sign up for these programs and split the payments up into equal chunks over the next few months.

The potential upsides include low- or no-interest options and a way to bypass the charges associated with credit cards. On the other hand, the products being sold with these programs almost always come with a price tag much higher than their retail value.

Since the convenience factor and small individual payments can be so appealing, it’s easy for shoppers to binge on items that they don’t need and might not ever even use. Center for Responsible Lending senior policy counsel Nadine Chabrier explained the vicious cycle.

“It is marketed as interest-free, but consumers can find that they end up being charged more than they think they will,” she explained, noting that consumers who “lose track of their payments or have multiple buy now, pay later purchases … can get return payment fees, missed payment fees, account reactivation, rescheduling, [and] all kinds of hidden fees that they weren’t aware of at the outset.”

Chris Agee August 12th, 2022

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